GOP throws tax reform into debt limit talks

House GOP leaders on Wednesday threw tax reform into the discussion for debt limit discussions, giving fresh momentum to Republicans fighting the uphill climb for a full rewrite of the code.

GOP tax writers stressed that they’d received nothing but a bare-bones framework stating that tax reform was on a list of demands, and that the news wouldn’t change their methodical pace they’ve adopted in crafting a broad tax overhaul. House Ways and Means Chairman Dave Camp (R-Mich.) insisted it was too early to say how the debt ceiling strategy would affect the committee’s work.

Still, Republicans on the panel clearly saw the decision from leadership as a boost to their efforts.

“I’m glad tax reform’s on the table as part of the package,” said Rep. Charles Boustany (R-La.). “That’s the key.”

The decision from GOP leaders comes as little as a month or so before Congress’s deadline for raising the $16.7 trillion debt ceiling. Republican demands for raising the debt ceiling also include delaying the implementation of President Obama’s healthcare law for a year, and green lighting the Keystone XL oil sands pipeline. A House Republican plan to extend government funding, which runs out at the end of the month, is expected to get a vote this week.

{mosads}Democrats on the Ways and Means panel have largely panned the idea of tying tax reform to the debt ceiling, with Rep. Sandy Levin (Mich.) – the committee’s ranking member – saying last week that tax reform needed to stand on its own. The idea also is unlikely to gain traction in the Senate, where Democratic leaders and Finance Chairman Max Baucus (D-Mont.) have all said they’re for a clean debt ceiling increase.

Though the details on the tax reform plan still need to be filled in, GOP aides at Ways and Means said the framework could look similar to a bill the House passed last summer that put a detailed timeline for tax reform into place.

That bill required Ways and Means to consider a bill based on the House GOP tax reform principles, which lower the top individual and corporate rates to 25 percent, and gave deadlines for both House and Senate action. The Senate did not take up the House bill last year.

The House GOP’s broad outline to overhaul the tax code would also scrap the Alternative Minimum Tax, limit taxation of corporations’ offshore income and set a goal of maintaining revenues at between 18 percent and 19 percent of the country’s gross domestic product. It does not say what tax breaks would be eliminated to pay for lowering rates.

Many tax observers in Washington still view a full-fledged rewrite of the code as unlikely, in no small part because of the divide between the two parties over revenue.

Rank-and-file House Republicans remain generally supportive of the idea of tax reform, but have also called it more of a long-term goal and say it may be a tougher sell with voters back home. With both the House and the Senate still working on tax reform bills, lawmakers on both sides of the aisle have also yet to see which popular tax breaks might need to get sliced in order to pay for reduced tax rates.

Ways and Means Republicans said Wednesday that it could take them weeks more to release a fully fleshed-out plan for their colleagues to see. The GOP tax writers have been meeting regularly over the past two weeks, and lawmakers expect those to continue in the weeks to come. 

“Nothing’s written on a piece of paper. Nothing’s even been written on blackboards recently,” Rep. Kenny Marchant (R-Texas) said coming out of a Wednesday tax reform meeting. “We haven’t taken a vote. We haven’t raised our hand. We haven’t come to any conclusions.” 

Republican tax writers added that they view their work writing a tax reform bill as moving on a separate track to the efforts from GOP leaders to get tax reform into the discussion on the debt ceiling. 

“The next big fight, we hope, is on the debt limit, to where we can talk about some fundamental tax reform,” said Rep. Devin Nunes (R-Calif.). 

“The legislation takes a lot of time to draft, and to draft right – versus kind of the overall strategic plan for how you would move tax reform,” Nunes added. “Ultimately, there has to be a larger agreement with the White House and the Senate.”